Senators to DOL: New Rule would Set Overtime Threshold at Level Not Nearly High Enough, would Deprive Estimated 3 Million Low- to Middle- Income Workers Potential Wages

Wednesday, May 22, 2019

WASHINGTON, DC – U.S. Senators Sherrod Brown (D-OH), Bernie Sanders (I-VT) and Patty Murray (D-WA) led 20 Senators in writing a letter this week to the U.S. Department of Labor (DOL), urging it to withdraw a proposed rule that would deprive an estimated 3 million workersof the overtime pay they have earned. In March, Brown and Murray blasted DOL when it announced plans to set the salary threshold under which workers would be guaranteed overtime pay at $35,308, down from $47,476 set by the Obama Administration. The public comment period for this rule ended this week, and the Senators are continuing to fight this proposed rule, as the Trump Administration’s overtime threshold is not nearly high enough and would deny low- to middle- income workers potential wages they have earned or more time with their families. As the ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, Senator Murray submitted an additional comment critiquing the flawed methodology DOL uses in the rule, and DOL’s lack of adherence to the congressional intent behind the Fair Labor Standards Act (FLSA).

According to the Economic Policy Institute, a preliminary calculation suggests that well over half of the workers who would have gotten new or strengthened overtime protections under the 2016 rule would be left behind by this rule. This means the Trump administration’s rule would leave out millions of workers.

“We write to express our strong opposition to the Department of Labor’s (DOL) proposed rule to rescind the 2016 overtime rule and replace it with a rule that will leave millions of workers without overtime protection,” the Senators wrote in their letter. “The overtime protections of the Fair Labor Standards Act (FLSA) ensure that employers do not overwork their employees, guaranteeing that workers are either paid for their long hours at work or are given more time with their families. The overtime protections also benefit workers more broadly, incentivizing employers to spread employment by hiring more workers rather than overworking current employees. Congress built into the FLSA a small exemption, however, for bona fide executive, administrative, and professional employees (EAP exemption), recognizing that this limited group of employees have enough individual market power to bargain for strong protections and compensation at work.”

Last Congress, Brown and Murray joined Reps. Bobby Scott (D-VA) and Mark Takano (D-CA) in introducing legislation to make millions of American workers newly eligible for overtime pay when they work more than 40 hours a week, providing economic security to millions of working families. Their Restoring Overtime Pay Act would increase the overtime salary level from $23,660 per year to about $50,000 per year, making at least four million workers newly eligible for overtime pay.

The Senators’ bill aimed to codify the Obama administration’s 2016 overtime rule, which would have strengthened overtime protections for millions of workers by extending eligibility for overtime pay to workers earning less than $47,476 annually. However, in August 2017, a federal judge in Texas blocked the Department of Labor (DOL) overtime rule from going into effect.

The Trump administration’s plan to lower the overtime salary threshold means that, compared to the 2016 rule, fewer workers would get the pay they have earned or get more time with their families.

We write to express our strong opposition to the Department of Labor’s (DOL) proposed rule to rescind the 2016 overtime rule and replace it with a rule that will leave millions of workers without overtime protection.

The overtime protections of the Fair Labor Standards Act (FLSA) ensure that employers do not overwork their employees, guaranteeing that workers are either paid for their long hours at work or are given more time with their families. The overtime protections also benefit workers more broadly, incentivizing employers to spread employment by hiring more workers rather than overworking current employees. Congress built into the FLSA a small exemption, however, for bona fide executive, administrative, and professional employees (EAP exemption), recognizing that this limited group of employees have enough individual market power to bargain for strong protections and compensation at work.

Since 1938, the Secretary of Labor has examined both an employee’s duties and salary level in determining whether the employee is a bona fide executive, administrative, or professional employee. In a 1940 report, DOL stated that “The final and most effective check on the validity of the claim for exemption is the payment of salary commensurate with the importance supposedly accorded to the duties in question.” However, a failure to appropriately update the overtime regulations has resulted in the salary threshold reflecting not executive compensation, but poverty wages. In fact, the salary threshold is so out of step with historical norms that while in 1975 it covered 60 percent of salaried workers, today it covers just 7 percent.

In 2004, DOL updated the overtime rules but made a fundamental error in doing so, raising the salary threshold for the first time since 1975 but also severely weakening the duties test. According to DOL itself, this resulted in the “inappropriate classification of employees as EAP exempt …” That is why, just three years ago, DOL finalized its rule updating the overtime salary threshold, raising it from $23,660 to $47,476 per year, thereby restoring the value of the salary threshold. At $47,476, the 2016 salary threshold covered one-third of full-time salaried workers and guaranteed overtime protections to 4.2 million workers.

As DOL knows all too well, the 2016 threshold was carefully developed after a robust process of stakeholder engagement. DOL spent more than a year meeting with over 200 interested parties to obtain input before issuing a proposed rule in 2015; considered more than 270,000 comments received during the 60-day public comment period on the proposed rule; conducted extensive economic analysis on the costs and benefits to workers and employers; and made significant changes in response to public input before issuing the final rule.

However, DOL now proposes to rescind this rule and put in its place an alternative threshold of $35,308 per year. At this level, the salary threshold would cover just 15 percent of full-time salaried workers and, according to DOL’s own analysis, strip almost 3 million workers of their overtime protections. Additionally, according to the Economic Policy Institute, another 5 million workers who had their overtime protections strengthened by the 2016 rule will be left behind by DOL’s proposed rule. All told, DOL’s proposed rule will deprive workers of $1.2 billion each year.

DOL claims it is revisiting the rule due to the decision from the U.S. District Court for the Eastern District of Texas that claimed the rule was somehow beyond the Secretary’s authority to create—a claim that several members of Congress rejected in a congressional amicus brief. However, DOL is disingenuous in acting as though rescinding the final rule and proposing a weak rule are its only options; DOL can, instead, defend both the 2016 rule and the Secretary’s authority under the FLSA in court, completing the appeal of the court’s decision to the 5th Circuit Court of Appeals that Secretary Perez began in 2016.

In order to preserve the overtime rights of nearly 3 million workers, defend the Secretary’s authority under the FLSA, rebuild the middle class through the restoration of the 40-hour workweek, and live up to the legacy of Secretary Frances Perkins, DOL must withdraw its proposed rescission and rulemaking and, instead, defend the 2016 overtime rule in court.